Appendix 13: Comparisons of Production-Volume Variance with Other Variances
The only new variance introduced in this chapter is the production-volume variance, which arises because fixed-overhead accounting must serve two masters: the control-budget purpose and the product-costing purpose. Underapplied or overapplied overhead is always the difference between the actual overhead incurred and the overhead applied. An analysis may then be made:
underapplied overhead = ( flexible-budget) + (production-volume)
13-48 Overhead Variances
Consider the following data for the Rivera Company:
Actual incurred $14,200 $13,300
Budget for standard hours allowed
for output achieved 12,500 11,000
Applied 11,600 11,000
Budget for actual hours of input 12,500 11,400
From the above information, fill in the blanks below. Be sure to mark your variances F for favorable and U for unfavorable.
a. Flexible-budget variance $______ Fixed $______Variable $______
b. Production-volume variance $______ Fixed $______Variable $______
c. Spending variance $______ Fixed $______Variable $______
d. Efficiency variance $______ Fixed $______Variable $______
Comparisons of production-volume variances with other variances are examined.